David Kirkpatrick

April 1, 2009

Peeking into the looming GM bankruptcy

Filed under: Business — Tags: , , , — David Kirkpatrick @ 2:04 pm

It ain’t over ’til it’s over, but it looks more and more likely that Genernal Motors and Chrysler will both do some flavor of bankruptcy protection in the coming months. Particularly since it seems that’s the preferred outcome at the White House.

Here’s some tea leaf reading on the GM version:

A possible bankruptcy plan being discussed for General Motors (GM.N) includes quickly forming a new company of the automaker’s most profitable parts, while a group of other units would remain under bankruptcy protection for a longer period, a source familiar with the plans told Reuters on Tuesday.

GM also would seek to have a new deal in place with the United Auto Workers union prior to any bankruptcy filing, the source said.

GM warned earlier on Tuesday that there is a rising chance it could file for bankruptcy by June, as the company has 60 days to reach deeper concessions with bondholders and unions after its previous restructuring plan was rejected by the U.S. government as insufficient.

While the automakers would still prefer to avoid bankruptcy, advisers to both GM and Chrysler LLC have been working to prepare for potential bankruptcy filings that would aim to preserve, or sell off, the best parts of the companies.

Under the plans being considered, GM would seek to quickly move its most profitable units into a new company separate from its other units in the early days of the bankruptcy filing, said the source who asked to remain anonymous because the person was not authorized to speak to the media.

The aim would be to show consumers, taxpayers, and the government that the new GM can survive and compete in the autos sector as a viable company, the source said.

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